Workers and employees are always at risk of suffering employment-related hazards during their employment term. Often labourers have the highest probability of injuries or death on the work site.
An organization becomes financially responsible to compensate workers/ or their family members for losses suffered due to:
- any physical injury
- disability or death due to their employment
This compensation has also been mandated in employment-related laws, and is, therefore, statutory.
A workmen’s compensation policy helps organizations meet their legal liabilities. It covers the compensation payable to employees or workers of the organization in case of unforeseen mishaps. Here are some reasons why having a WC policy is important:
The importance of Workman Compensation Insurance
Compliance with applicable laws
Organizations in India are governed by the Factories Act, of 1948 and the Workmen’s Compensation Act, 1923. The latter is also called the Employees Compensation Act, of 1923. Both these Acts emphasise employee welfare. The Factories Act lays down rules for a safe working environment. The WC Act facilitates the financial security of employees and their families in case of physical injuries, disabilities and death.
Under the Workmen’s Compensation Act, organisations become financially liable to compensate their employees in case of injuries or deaths. The workmen’s compensation policy helps organisations deal with the implications of these Acts. The policy provides financial coverage to the employees in case of any accidental injuries or death as specified under the WC Act.
Financial stability
The workmen’s compensation policy provides financial stability to the employer by taking care of the financial liability payable to employees. It saves the employer from paying the stipulated compensation for the physical injury or death of its employee at the workplace. Therefore, it allows the employer to carry out its operations without the risk of any sudden financial outflows and provides financial stability.
Comprehensive coverage
The workmen’s compensation policy covers injuries, disabilities and even death if suffered by an organization’s employees. Moreover, there are optional coverage benefits extended by the policy at an additional premium. Therefore, it is a comprehensive coverage policy, extending help for possible legal liabilities suffered by the organization due to employee-related accidents.
Beneficial for the employer and the employee
Workmen’s compensation insurance is important for both the employer and the employee. By covering the compensation payable to injured employees, the policy undertakes the employer’s liabilities. Moreover, it provides secured benefits to employees in case of contingencies. This gives them the assurance that if they suffer any untoward incident during their employment, their employer would provide financial compensation even during difficult business cycles.
Goodwill for the organization
By taking care of the workers, the workmen’s compensation policy helps companies avoid possible lawsuits and legal liabilities. Moreover, it enables the company to be financially stable to discharge its liabilities without affecting its financial reserves. This helps organizations create goodwill and reputation in the industry. Workers are keen to join organizations that have a workmen compensation policy in place while the financial stability provided by the policy increases the company’s value.
The economic rationale for Workman Compensation Insurance
The awards to workers by the Worker courts depend upon several factors such as the age of the worker, current earnings and number of dependents. Typical awards range between Rs 10 to 75 lakhs. In comparison, the premiums for a regular workman compensation insurance range between Rs 5000 and 15,000 for most small or medium businesses. That’s why it makes strong economic sense to hedge the unlimited worker liability through low-cost workman compensation insurance.
So, all these points highlight the importance of workmen’s compensation. It’s important to understand this and invest in a suitable policy for your organisation.
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